National Minimum Wage and the National Living Wage: Post Budget

Dec 07, 2015
Back in September the Department for Business, Innovation and Skills (BIS) announced new measures intended to improve compliance with the national minimum living wage (NMW) and national living wage (NLW) when it comes into force in April 2016.

The National Living Wage was announced in the summer budget as the new compulsory living wage for workers aged 25 and above and has been described as a rebranded minimum wage for that age bracket. 

In September, there started a supermarket price war of a different kind- a battle for supermarkets to justify its wage policies after budget supermarket Lidl announced that it would pay its staff the minimum wage recommended by the Living Wage Foundation rather than that set out in the budget.  Lidl is set to join the 2002 other companies current accredited by the Living Wage Foundation. The Living Wage Foundation’s rate is an informal benchmark calculated by academics to be the level of pay sufficient to provide workers with a basic standard of living.

The BIS’ measures for compliance include doubling the penalty for non-payment, increasing the budget for enforcement of the NMW and NLW, establishing a new dedicated team within HMRC to pursue the most serious failures, introducing a ‘Director of Labour Market Enforcement and Exploitation’ to oversee such enforcement and introducing. 

Although it is not clear when such measures will come into force it was shown that such measures are necessary when the government responded to the written question of Emily Thornberry MP last week. Ms Thornberry asked: ‘How many employers were (a) charged with and (b) convicted of a criminal offence by the Crown Prosecution Service for non-compliance with minimum wage legislation in each of the last five years.’

The government advised that the majority of employers identified as paying below the National Minimum Wage pay arrears on receipt of a formal Notice of Underpayment. Where they do not do so, HMRC pursues recovery through the civil courts. For deliberate non-compliance or obstructive behaviour HMRC operates a policy of selective and exemplary criminal investigation action as part of a wider enforcement strategy.

This selective enforcement policy has led to no criminal charges for non-compliance in financial year 2010-2011 (although one employer was convicted of an earlier charge), one charge in financial year 2011-2012 and one conviction in 2012-2013. No cases were charged or convicted in 2013 – 2014 and one was charged 2014-2015. 

Such numbers should be expected to increase when the dedicated HMRC team and Director of Labour Market Enforcement and Exploitation are implemented. 

Darren Hayward

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Darren Hayward

Darren joined Nockolds in 2003 and is the firm’s Managing Partner and Partner in charge of our Employment Law Team. 
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